Guidelines for Suppliers and Retailers
Shrink is inventory that cannot be accounted for. It is the disappearance of product.
Sometimes it’s real, such as theft or returns.
Sometimes it’s a "data error" or "false" shrink. For example, missing deliveries, scan sales, or counts.
The following are guidelines in preventing, identifying, and researching "false" shrink. In all cases, your best tools for managing shrink are the reports available from Park City Group. Most of these reports are sent to you automatically, while others you can generate online.
This guide is primarily written for the supplier. However, retailers can use these tips as well, particularly when working with suppliers.
The #1 prevention technique is to address all errors and discrepancies daily as identified in your e-mail alerts.
Most of the discrepancies identified in the reports ultimately create shrink. Rather than waiting and accumulating errors over time, you will find it much easier to research and correct errors immediately upon receiving an alert. Oftentimes errors that occur today will cause additional errors tomorrow. By reacting quickly to your e-mail alerts, you can prevent future errors from occurring.
With the exception of the "Missing Scan Sales and No Sales / Some Deliveries alerts, the reports listed below can be used to research errors internally, using your company's resources.
Researching errors online in Item Movement and Inventory & Shrink can also be helpful.
These reports and alerts are described below.
Missing Deliveries Alerts 1 & 2
Missing-delivery errors occur when delivery data does not arrive for a store as expected.
Level 1 alerts are sent when no deliveries have been reported for a store in the past 7 days.
Level 2 alerts are sent when no deliveries have been reported for a store in the past 14 days.
Depending on your route-settlement process and the time it takes to complete, a level one alert may not require any action. However, a level two alert is a definite indicator of potential shrink, and should be resolved.
Missing Scan Sales Alerts 1, 2 & 3
Missing scan-sales alerts are produced when sales data does not arrive for a store as expected.
Level 1 alerts are sent when no scan sales are reported from the previous day for a store.
Level 2 alerts are sent when scan sales are missing for two days.
Level 3 alerts are sent when scan sales are missing for three or more days for a store.
Scan sales can be missing for a range of reasons, from a store being closed for a holiday to a system failure that prevented scan sales from being retrieved for the day.
As a corrective measure, a retailer can either submit the missing sales in a separate file or include them in the next day’s sales.
To clear the alert and enable accurate shrink calculation, communication between the supplier and retailer is important. For example, trading partners should validate that sales were actually sent, and if so, how / when they were submitted.
These reports list delivered items that did not post from a delivery file received by Park City Group. The reason behind each error is listed by item in the report. The most common errors are caused by items not being authorized, having no cost in effect, or simply not existing within the supplier's Park City Group item catalog.
If not corrected quickly, Delivery Errors can significantly impact shrink.
The reasons given for each error will direct your required action. Delivery errors can often be easily resolved by:
Communicating with the delivery driver,
Calling the retailer to request that they authorize (accept) the item in Park City Group,
Ensuring that each item has a current cost, or
Sending new item maintenance to Park City Group.
After resolution, deliveries for erred items can be resubmitted through your normal online or EDI process.
When Park City Group receives a delivery file, we compare any costs included in the file with those currently set up in your Park City Group item catalog. If the costs do not match, discrepancies are logged in this report for you to resolve.
Cost discrepancies are often associated with a hand-held unit that has old cost information, or pricing-maintenance for your item catalog that was not updated in a timely manner.
It is important to note that the cost used to invoice your retail customer is the current cost in Park City Group. If that cost is incorrect, the result can be over / under charges on your daily-movement invoices and incorrect charges for shrink calculation and settlement.
This report lists item sales that did not post to Park City Group. Sales files are normally sent by the retailer.
Scan sales errors can occur because an item is not authorized, no current cost is in effect, a matching item was not found in your catalog, or because the retailer has tied an item to an incorrect vendor number.
You should be able to address most of these issues internally. However, some issues will require discussions with your retailer.
This report identifies items that have been delivered, but for which no sales have been reported in the last 14 days. Items are identified by UPC and store.
These items could simply be slow movers, or this could be a sign of errors such as deliveries with incorrect item numbers or UPCs. In addition, the retailer may not have the items correctly tied to your vendor number.
After researching internally, your next step should be contacting the retailer for discussion.
This report lists errors associated with items that were received in an inventory count file.
Most count errors are generated from unauthorized items, items with no cost in effect, or items that are not loaded in your item catalog. Errors can also arise from problems with the physical count itself.
If the item is excluded, there will be no shrink calculation performed on it. You will be 'giving away' that product because it's not 'delivering,' 'scanning,' or showing up in a 'physical.'
The information in these reports has usually been identified in other reports, such as Count Errors and Delivery Errors. However, this report also alerts you when an entire delivery or count file erred due to system or data issues.
While these errors seldom occur after implementation, when they do occur they impact a large number of stores and significantly affect your shrink.
You can receive shrink reports automatically via e-mail, or you can request shrink reports online in Inventory & Shrink. You have the option to receive all reports, or only those you find useful for managing your shrink.
These reports provide a running count of shrink as of your initial buyback or last shrink settlement.
The standard shrink reports available are available in RTF or CSV.
You can also receive reports that list the changes or "deltas" since your last count.
This report provides a quick snapshot of shrink, summarized by store, for the stores that were sent in the transaction set. It can be sorted to report poorly performing stores first.
Lists all inventory counts sent in the transaction set that are outside the designated shrink limit. Shrink is summarized by store.
During the implementation, your team designated a shrink target against which all stores are compared. For example, a target can be set to alert on shrink exceeding 1% of units or 2% of sales. This report shows only the stores that have exceeded this parameter. We recommend that you also use the Outside Limit By Item report to drill down further and identify shrink issues on the item level.
Lists all inventory counts that are within the designated shrink limit. Shrink is summarized by store. Ideally, this is a list of stores that held down shrink to better than expected levels.
Lists all inventory counts sent in the transaction set that are outside the designated shrink limit. Shrink is listed by item at each store.
This report is very helpful when performing a detailed analysis of shrink.
When your shrink numbers are higher than expected, there are some basic steps you can take to uncover errors.
First, perform some basic research:
Review the All Counts Summary report. Afterwards, use the Outside Limit by Item report to focus your attention.
Verify that all credit tickets are being reported.
Next, ask the following questions:
Does this store or group of stores have a history of excessive shrink? If this is an anomaly, perhaps no research is required at this time. Then again, a new count may be justified.
Have all alerts and notifications received for these stores been researched and addressed? These alerts will identify most problems, and validate that retailer scan sales have been reported.
Are new people working within the system, or have processes changed since the last count?
Are you finding common items / issues across multiple stores?
Discuss your concerns with your retail customers in specific stores. They may be aware of additional information that is impacting shrink, and may be able to perform research from their side.
About Researching Negative Shrink
When your shrink numbers are negative, you may need to take a different approach to your research. Negative shrink shows that more items sold than were initially on hand or delivered.
Negative shrink should always be investigated. For example, your research should include:
Verifying that all deliveries have been submitted.
Verifying that debit and credit deliveries are reflected correctly.
If physical counting errors are possible, consider performing interim counts on a weekly or more frequent basis.
If addendum-sales were posted by the retailer, validate that the addendums aren't duplicates of previously posted sales. (This will be evident at the item level.)
Updated 3/8/2005